January 2008

The State EITC Online Resource Center is pleased to present its electronic newsletter on current policy developments around state and federal Earned Income Tax Credits. For more information, please go to: www.stateeitc.com.

Feel free to forward this newsletter to your interested associates and to email amy@thehatchergroup.com with news, information or other resources to be added to the update. If you do not want to receive this newsletter in the future, please reply with the word UNSUBSCRIBE in the header.

With the legislative session in full-swing for many states, the state EITC online resource center will provide frequent policy updates during the first part of 2008. As individual states pass an EITC we will send a short alert notifying the network about the news.

State Updates:

Colorado coalition works to re-instate the state’s EITC
In 1999, the Colorado legislature created a state Earned Income Tax Credit as a TABOR refund mechanism, available only in years of TABOR surpluses.  Due to recession and Referendum C, the state EITC has not been available since tax year 2001.  If the EITC continues as a TABOR (Taxpayer Bill of Rights) refund mechanism, it is likely that the EITC will not be available until 2013.  A coalition of advocates is engaging in an outreach and education campaign to support legislation that would detach the state EITC from TABOR and fund it independently.

Connecticut coalition continues efforts to enact state EITC
A broad-based coalition in Connecticut is continuing efforts to enact a state EITC.  This measure nearly passed during the past two legislative sessions but the Governor blocked its passage in the final budget and revenue package each session. The coalition hopes to gain more Republican support with the help of the new senate minority leader who strongly supports the EITC.  The coalition also will highlight the recommendations, including enactment of a state EITC, from a panel of national policy experts on how to reduce child poverty. To help bolster the importance of enacting a state EITC for working families, the coalition will engage in an extensive education effort about free tax preparation, asset building and the importance of claiming the federal EITC.

State EITC prospects hopeful in Kentucky
Kentucky advocates are joining efforts to push for enactment of a state EITC.  In 2004, one of every five Kentucky households claimed the federal EITC, returning almost $600 million to low-wage earners. A press conference is scheduled for January 31 to kick off the campaign and to release a new Kentucky Youth Advocates policy brief on enacting a state EITC in Kentucky.

Maryland legislature increases state’s EITC during special legislative session
The Maryland EITC was expanded to benefit more low- and moderate-income Marylanders during a special legislative session.  Previously only workers with children could claim a 20 percent refundable EITC, while a 50 percent nonrefundable EITC was available to all federal EITC recipients. The legislature increased the refundable EITC to 25 percent and extended it to workers without qualifying children.

EITC legislation in Pennsylvania passed with costly amendments
Pennsylvanians for Economic Opportunity, a coalition of advocates, has been engaged in an intensive outreach and education campaign as the state considers a 30 percent EITC.  The legislation would allow Pennsylvanians to claim either the existing Tax Back program or the new EITC. Jean Hunt, from Campaign for Working Families, authored an op-ed that appeared on New Year’s Day in the Philadelphia Inquirer encouraging passage of the legislation. Read the op-ed

The state EITC legislation faced its final vote in the house last week. Representatives spent the entire day debating and voting on a series of largely unrelated amendments that were attached to the legislation. These amendments made a series of cuts to business, individual, and consumption taxes which would cost the state $4 billion in lost revenue, nearly 13 percent of the state's general fund. The amended EITC bill passed the house unanimously. The coalition issued a statement voicing their disappointment with the vote, stating "the coalition cannot endorse any political exercise that erodes state revenues and causes spending cuts to crucial services." The coalition hopes to have an unamended version of the state EITC legislation introduced in the senate.

Washington could become first state without an income tax to enact state EITC
Taxes in Washington hit low-income families disproportionately hard because of the heavy reliance on sales and property taxes.  The Washington State Budget & Policy Center and the Tax Fairness Coalition are encouraging the legislature to enact a Working Families Credit based on the federal EITC. The Seattle Post Intelligencer’s editorial board ran an editorial encouraging adoption of the Working Families Credit to help make the state tax system fairer.
Read the editorial

Reports and Resources:

State EITC issue briefs available by request
The Hatcher Group and the Center on Budget and Policy Priorities have created issue briefs on key EITC issues including refundability, error rates/overpayment, gaining business support for a state EITC, and financing a state EITC.  These briefs are intended for advocates working on enacting or expanding a state EITC.  If you would like to receive a copy of these briefs, please contact amy@thehatchergroup.com

Center on Budget and Policy Priorities summarizes state EITC progress
Jason Levitis and Jeremy Koulish published “A Majority of States with Income Taxes Have Enacted State Earned Income Tax Credits,” which reviews the current status of state EITCs nationwide.
Read the report

Tax credit outreach toolkit now available
The Center on Budget and Policy Priorities launched its 2008 Tax Credit Outreach Toolkit and website. The toolkit and website provide a variety of information about tax credits for working families and outreach strategies. To order the toolkit, email eickit@cbpp.org or you may view the kit online by following this link: http://www.cbpp.org/eic2008/